Bay View Group LLC and The Spalena Company LLC v. Republic of Rwanda

Case summary

At a glance

Parties: Bay View Group LLC and The Spalena Company LLC (Delaware, USA) v. Republic of Rwanda
Case no.: ICSID Case No. ARB/18/21
Forum and rules: ICSID Convention; ICSID Arbitration Rules (2006). Place of proceeding Paris; the hearing was held by videoconference, with the Tribunal sitting in London
Treaty: United States–Rwanda BIT (in force 1 January 2012)
Tribunal: Lord Phillips (President), J. Truman Bidwell, Jr., Barbara Dohmann
Sector: Mining (tin, tungsten, coltan concessions)
Outcome: Award of 30 March 2022: Bay View's claims dismissed for lack of jurisdiction; Spalena's claims dismissed on the merits; the Claimants pay Rwanda's costs.
Amount: Claimed: losses said to exceed US$95,000,000 (quantum was bifurcated). Awarded: nothing. Costs: the Claimants, jointly and severally, pay Rwanda £1,312,233.10 and US$361,783.72, plus interest at SONIA from the date of the Award.

The dispute

Roderick Marshall, a US investor, controlled two Delaware companies, Bay View Group (BVG) and Spalena. On 23 December 2010 Spalena bought from H.C. Starck the holding company of Natural Resources Development (Rwanda) Ltd (NRD). Under a four-year contract of 24 November 2006, NRD held special permits for five mining concessions: Rutsiro, Mara, Sebeya, Giciye and Nemba. The Claimants argued that NRD had a vested contractual right to, and a legitimate expectation of, long-term licences. They said Rwanda defeated these through a "creeping expropriation" that ended when NRD's licence applications were rejected on 19 May 2015 and the concessions were put out to tender in 2016. The alleged steps were collusion with a former shareholder, Ben Benzinge; the suspension of mining in the western concessions; seizures by a court bailiff; the refusal of mineral tags; and the requirement to re-apply under the 2014 Mining Law. They claimed breaches of national and MFN treatment, the minimum standard of treatment (fair and equitable treatment and full protection and security) and the expropriation article (Articles 3–6). Rwanda objected to jurisdiction ratione temporis, personae, materiae and voluntatis. On the merits it argued that NRD never had any right to long-term licences and that the measures were lawful or could not be attributed to the State.

Key holdings

BVG has no standing. The Tribunal rejected each basis BVG put forward. It found no write-off of a liability as part of the price for NRD, no loan of US$100,000 to NRD, and no transfer of equipment worth US$2,252,502 in exchange for an interest in Spalena. BVG's claims were dismissed for lack of jurisdiction. Award, pp. 47–50
Spalena's indirect controlling shareholding in NRD is an investment. NRD met the six Phoenix v. Czech Republic criteria despite the modest purchase price. Rwanda's argument that Spalena's claim should have been brought on NRD's behalf under Article 24.1(b) did not defeat jurisdiction ratione materiae at the liability stage. Award, pp. 56–61
The cut-off date for limitation under Article 26(1) is 12 June 2015, three years before the Amended Request; the withdrawn original Request does not count. Because no breach was found, the time-bar objection became academic. The Tribunal declined to rule on the notice-of-intent objection (ratione voluntatis), calling it technical and unattractive. Award, pp. 35, 132–133
NRD never acquired a contractual right to long-term licences. It failed to proceed immediately to industrial exploitation (Article 2.3), did not evaluate its reserves or provide a feasibility study (Article 2.5), and obtained no positive evaluation from Rwanda (Article 4). The 2010 Application was for short-term, five-year licences under the 2008 Law. Award, pp. 73–80
No legitimate expectation arose, either before or after the acquisition. Neither the general understanding in the mining community nor any statement by an authorised official (including Mr Bidega and Minister Biruta) could reasonably have led the Claimants to expect long-term licences for the Five Concessions. Award, pp. 81–100
None of the alleged incidents breached the BIT: Mr Benzinge's acts, the suspension of the western concessions, the bailiff's seizures and the refusal of tags. Denying NRD tags while letting it mine was self-contradictory and irrational, but it was done in good faith and was not itself a BIT breach. NRD had no legal rights over the concessions after October 2012, so there was nothing to expropriate. The smuggling-driven creeping-expropriation theory was the product of Mr Marshall's imagination and "scurrilous and unfounded". No discrimination was found under Articles 3 and 4. Award, pp. 100–132
Costs follow the event. Rwanda recovers its costs, including the costs of the bifurcation request but not those of its unsuccessful security-for-costs application; its counsel fees were reduced to £900,000. The Claimants, jointly and severally, pay £1,312,233.10 and US$361,783.72, with interest at SONIA from the date of the Award. Award, pp. 137–140

Procedural history

18 May 2018ICSID received a Request for Arbitration dated 14 May 2018 from Bay View Group and Natural Resources Development Group. The Request was later withdrawn.
12 June 2018Amended Request for Arbitration filed by Bay View and Spalena. ICSID registered it on 22 June 2018.
3 October 2018Tribunal constituted. At the first session on 3 December 2018, quantum was bifurcated from the merits.
28 June 2019Procedural Order No. 2 on bifurcation of Rwanda's preliminary objections. On 28 August 2019 PO3 reversed the decision on the temporal objection, and Rwanda then withdrew its bifurcation request.
28 September 2020Procedural Order No. 6 denied Rwanda's application for security for costs.
19 February 2021The United States filed a non-disputing party submission under Article 28.2 of the BIT.
21–30 June 2021Hearing on jurisdiction and the merits held by videoconference, with the Tribunal sitting in London.
30 March 2022Award: BVG's claims dismissed for lack of jurisdiction, Spalena's claims dismissed on the merits, and costs awarded to Rwanda.

Tribunal, counsel and experts

Decided by: Jr. J. Truman Bidwell Co-arbitrator — appointed by the claimant (Respondent sought clarification of his disclosures but did not propose disqualification)
Barbara Dohmann Co-arbitrator — appointed by the respondent
For the claimant: Duane Morris LLP
For the respondent: Joseph Hage Aaronson LLP · 4 Stone Buildings · Ministry of Justice, Republic of Rwanda · Rwanda Mining Board
Experts: Richard Mugisha (respondent) · Olivier Rwamasirabo (claimant)